TRAVERSE CITY — For the past decade, Munson Healthcare added 150 to 200 full-time equivalent jobs every year to its two hospitals, North Flight and Home Healthcare.
Those days are over, said Ed Ness, Munson Healthcare president and chief executive officer.
“This current budget year, we’ll have flat growth, and my guess is next year we’ll be down from this year,” he said.
Northern Michigan's largest employer expects to take a $150 million blow over the next 10 years — about $10 million this year—because of the Affordable Care Act. Now it will lose another $3 million, thanks to the recent 2 percent cut imposed by the federal sequester.
On the positive side, Ness said, those cuts didn't take anyone by surprise and shouldn't affect patient care. Nursing ratios in the 4,053-employee health care system will stay the same, he said.
Despite the dollar squeeze, Munson plans to pay double salaries for the position of Munson Medical Center president for about six months. Kathleen McManus, current president, plans to leave this fall. Her replacement, Alfred Pilong Jr. will come on board April 3.
In 2011, McManus earned a total of $319,109, including a base salary of $232,504, according to Munson's tax records. Munson officials would not discuss Pilong's salary.
Ness said it's money well-spent. The six-month overlap will allow Pilong time to develop key relationships and deal with long-term issues. McManus might leave earlier if she’s ready and the transition goes smoothly, he said.
“Out of a $500 million expense budget, ensuring a good transition at a very important executive level is well worth the investment,” he said.
Munson predicted the millions in Medicare reductions and built them into the budget year that ends June 30, Ness said.
“This has created challenges, but we assumed it would happen,” he said. “Back before the election, whether it was won by a Democrat or Republican, we knew Medicare cost growth was unsustainable.”
On top of the Medicare cuts, Munson is seeing fewer patients. Inpatient volume is down a few percentage points because Medicare and private insurance companies are tightening rules on who receives inpatient care. Doctors must obtain more prior approvals and authorizations for an admission, he said.
“So things in the past that were done on an inpatient basis are being done outpatient,” he said. “I think some of it’s good. It’s appropriate.”
Munson is achieving staff reductions gradually with turnover, retirements, and job transfers to different departments. McManus and others determine whether a position is necessary when it becomes vacant, he said.
“And that’s why we were trying to be proactive and thoughtful,” he said. “We could do this over time rather in a crisis and doing something dramatic that would involve a significant layoff.”